You may have heard the saying, safe as houses. This is a common misconception. It’s just that houses are valued less often than listed investments. Direct property is a growth asset that fluctuates in value and has a similar level of risk as direct shares. The decision to invest in such an illiquid and costly asset should not be taken lightly. Such a large investment in direct property may mean that your portfolio is now overweight property and underweight in all other asset classes.

Purchasing property via a self managed super fund and non-recourse loan has been widely publicised lately by property spruikers and financial planners that receive commission from property developers. Non-recourse loans tend to have a higher interest rate than most mortgages and even a geared property will take up a large portion of most people’s super savings. Perhaps a more diversified portfolio with less risk would be more suitable than risking a large amount of your retirement benefits/accumulated wealth on a single asset. A highly concentrated portfolio dramatically increases risk and the impact a single investment has on your overall wealth. You can invest in property through a managed fund or listed investment company (inside and outside super) which will hold a far less concentrated portfolio of quality assets that are managed by professionals. The minimum investment is substantially lower and gearing into property also increases investment risks.

Dividends from many listed companies on the Australian Stock Exchange are superior to most yields (income) from rental properties and you also receive franking credits (tax benefits). Most people already own their own home or have a mortgage so you’re effectively doubling up on a single asset class.

There are exceptions to every rule and purchasing the right property in the right area for a bargain can generate above average profits, however don’t forget about the golden rule of investing, not all your eggs in one basket.